Oil News: Billions in U.S. Shale Assets Are Reportedly up for Sale

The big oil news this week, other than the continued slump in oil prices, is that some well-known petroleum producers are looking to unload billions of dollars in shale assets. Bloomberg reported that Pioneer Natural Resources has put its oil assets in the Eagle Ford shale up for sale, and that Occidental Petroleum is seeking a buyer for its acreage in North Dakota. Let's drill a bit deeper into this news to see why they intend to unload these oil-rich resources.

Pioneer Natural Resources puts the Eagle Ford on the marketPioneer Natural Resources is reportedly seeking $4 billion-$4.5 billion for the Eagle Ford assets, which is less than the $5 billion the company was said to be seeking earlier this year.

As the following map shows, Pioneer's acreage is right in the sweet spot of the play.

Source: Pioneer Natural Resources Investor Presentation.

While Pioneer Natural Resources has a strong position in the Eagle Ford shale, the company has an even stronger position in the Permian Basin. Because of that a potential sale of this asset has been rumored for months, as the cash could then be reinvested into the Permian. The rumors have been so strong CEO Scott Sheffield addressed them last quarter on the company's conference call:

I want to make a comment in regard to the media comments on our Eagle Ford assets. Our Eagle Ford assets have been rumored to be up for sale. I've always said in the past, all of our assets are always up for sale at the right price. The company has a policy not to comment on any rumors in the marketplace.

While that right price seems to have changed, that appears to be because oil prices are much lower now. That's a bit of a concern for Pioneer Natural Resources, which needs high oil prices in order to produce the cash flow to develop its assets in the Permian Basin. In fact, this could be why the company has decided to cash in on the Eagle Ford now, as a further slump in oil prices would make a sale of the asset even less appealing.

Occidental Petroleum seeks to exit the Bakken shaleBloomberg reported that Occidental Petroleum is seeking upward of $3 billion for its 335,000 net acres in the Williston Basin of North Dakota. This news really isn't a surprise at all given that the company has largely ignored the play. In fact, most of its acreage is undeveloped as Occidental's cost structure has been too high for the play to drive strong enough returns for the company. This is why the company currently produces about 17,000 barrels of oil per day in the basin, ranking it 18th in the play behind many smaller rivals.

Instead, the company, like Pioneer Natural Resources, has turned most of its attention to its position in the Permian Basin to drive future growth, as noted in the following slide.

Source: Occidental Petroleum Investor Presentation.

Occidental Petroleum sees its leading position in the Permian Basin being its core growth driver going forward. The position yields higher returns for the company, enabling Occidental to create more value for investors than it could from its position in North Dakota.

Investor takeawayIn reading the latest oil news it might seem the Bakken and Eagle Ford shale plays have lost their luster, as Pioneer Natural Resources and Occidental Petroleum want to unload their assets even as oil prices slump. However, by drilling a bit deeper we can see these sales make perfect sense for the companies because both simply have stronger positions in the Permian Basin. While we could argue these sales should have happened when oil prices were higher, in all likelihood it's the fall in oil prices that pushed Pioneer and Occidental to sell in case oil prices get even weaker and make a sale unappealing.

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